2024 (11) TMI 308 - AT - Income Tax

Penalty u/s 271(1)(c) - addition in respect of disallowance of loss on Forex Derivatives treating it as speculative loss and disallowance of Foreign Exchange Fluctuation loss which was claimed by the assessee as per the assessee s understanding - HELD THAT - The advice given to the assessee by the Consultant cannot be termed as furnishing of inaccurate particulars of income as envisaged under Section 271(1)(c) of the Act for penalty provisions. The decision of Hon ble Apex Court in the case of Reliance Petroproducts Pvt. Ltd 2010 (3) TMI 80 - SUPREME COURT is categorically applicable in the assessee s case and, therefore, the penalty levied under Section 271(1)(c) of the Act is not justifiable on the part of the Assessing Officer. Thus, the penalty is deleted. Appeal of the assessee is allowed.

Summary

Issues:
Penalty under Section 271(1)(c) of the Income Tax Act for inaccurate particulars of income.

The appeal was filed against the order passed by the CIT(A), National Faceless Appellate Centre for the Assessment Year 2008-09. The grounds of appeal raised by the assessee challenged the penalty of Rs. 1,43,24,576 levied under Section 271(1)(c) of the Act. The appellant contended that the penalty was not justified as the case did not fall within the scope of the provision. The appellant argued that complete details and submissions were provided to the Assessing Officer, and hence, no penalty was warranted. The CIT(A) confirmed the penalty without adequately considering the submissions and legal decisions presented by the appellant.

The Assessment under Section 143(3) of the Income Tax Act was completed, resulting in a reduced loss compared to the one declared by the assessee. Various additions and disallowances were made by the Assessing Officer, leading to the initiation of penalty proceedings under Section 271(1)(c) for inaccurate particulars of income. The penalty was imposed based on the Assessing Officer's satisfaction that inaccurate particulars were furnished with an ulterior motive. The penalty amount was set at Rs. 1,43,24,576.

The appellant challenged the penalty order before the CIT(A), who partially allowed the appeal. The appellant argued that penalty proceedings were initiated only for specific additions/disallowances, and the penalty was levied on those items except for one related to loss on Forex Derivatives. The CIT(A) was criticized for passing the order summarily without addressing the appellant's contentions and legal arguments against the penalty. The appellant relied on the decision of the Hon'ble Apex Court in the case of CIT vs. Reliance Petroproducts Pvt. Ltd. to support the argument that making an unsustainable claim does not constitute furnishing inaccurate particulars of income.

After hearing both parties and examining the relevant material, the Tribunal noted that the additions related to loss on Forex Derivatives and Foreign Exchange Fluctuation were confirmed in the quantum appeal. However, it was emphasized that the advice provided by the consultant to the assessee could not be considered as furnishing inaccurate particulars of income for penalty purposes under Section 271(1)(c) of the Act. Citing the decision in the case of Reliance Petroproducts Pvt. Ltd., the Tribunal concluded that the penalty imposed by the Assessing Officer was not justified and subsequently deleted the penalty.

In conclusion, the Tribunal allowed the appeal of the assessee, and the penalty under Section 271(1)(c) of the Act was set aside. The order was pronounced in open court on 28th August 2024.